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MarketScreener Homepage  >  Equities  >  NEW ZEALAND STOCK EXCHANGE  >  New Zealand Refining Company Ltd    NZR   NZNZRE0001S9

NEW ZEALAND REFINING COMPANY LTD

(NZR)
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New Zealand Refining : Operational Report for July-August 2019

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09/17/2019 | 11:52pm EDT

18 September 2019

Refining NZ Operational Update for July/August 2019

HIGHLIGHTS

  • The Company earned NZD 56.2 million in Processing Fees for July/August, NZD 24 million more than the May/June period.
  • Refinery throughput was 7.42 million barrels, the highest for 2019 which was achieved due to good utilisation by our customers and excellent refinery availability.
  • Refining NZ's Gross Refining Margin (GRM) was strong at USD 7.10 per barrel which represents a healthy uplift over the Singapore Dubai complex margin.
  • Global refining margins werestronger in July/August as gasoline cracks recovered and middle distillatecracks rose strongly.
  • Lloyd's Register has issued an upgraded Refinery to Auckland pipeline certificate of fitness for an 82 bar gauge maximum operating pressure. The RAP is now delivering greater flowrates and providing increased resilienceof supply to Auckland.
  • Process and personal safety performance remained excellent:
  1. No Tier 1 or Tier 2 process safety events in the July/August period; and
  1. The lost time injury frequency is currently 0.27per 200,000 work hours

COMMENTARY

Refining - Margins and throughput

The refinery achieved throughput of 7.42 million barrels due to good utilisation by our customers and excellent refinery availability. This throughput, coupled with a GRM of USD 7.10 per barrel, has earned the Company NZD 56.2 million Processing Fee revenuein the July/August period. Revenueshowed an increase of NZD 24 million compared to the May/June period.

The refinery achieved excellent Operational Availability of 99.8% during the July/August period.

Global refining margins

Global refining margins recovered in July across the barrel. Gasolinemargins recovered to a 10-month high of USD 8.50 per barrel due to the permanent shutdown of a key USA refinery and unplanned Asian refinery outages. As a result, Singapore inventories fellwell below the five-year average. Middle distillates reached a year high as a result of strong demand and subdued Chinese exports. Fueloil margins recovered strongly by USD 6.00 per barrel due to tight supplies and sustained demand. August was a mixed month with the gasoline margin losing some of its gains and dieselrising further to above USD 16 per barrel due to outages in key exporting countries. Fuel oil fell strongly by USD 8 per barrel, likely driven by sentiment as supplies remained tight.

Page 1 of 6

Uplift over Singapore Dubai complex margin

Refining NZ's July/August uplift over the Singapore Dubai complex margin was healthy at USD 3.87 per barrel enabled by a balanced product slate, locational advantage and stable operations but negatively impacted a modest recovery in the naphtha margin. The Singapore Dubai complexmargin for the July/August period was USD 3.23 per barrel.

Exchange rate

The average exchange rate for the July/August period was USD/NZD 0.66.

Natural gas

Natural gas supplies returned to more normal levels in July/August as the Pohokura offshore natural gas field production performance improved and Refining NZ was able to access its portfolio of additional 2019 gas supply. Natural gas prices fell more than ten percent compared to the May/June period.

Distribution - Refinery to Auckland Pipeline (RAP)

Operational availability on the pipeline was high and the volume of product delivered through the pipeline remained strong.

Lloyd's Register has issued an upgraded RAP certificateof fitness for an 82 bar gauge maximum operating pressure. The RAP is now operating at the increased pressure, delivering greater flow rates and providing increased resilience of supply to Auckland.

Government Pipeline Inquiry

Refining NZ welcomed the publication of the Government Inquiry report into the September 2017 pipeline outage and the resilience of the fuel supply to Auckland. It is pleased that the Inquiry concluded that Refining NZ maintained and operated the RAP properlyand in keeping with all legal requirements and standard industry practice and that the response of our staff and contractors to the pipelinerupture was of a high standard. We are also pleased that the Inquiry has noted that Refining NZ is working to make timely investment decisions and that we have a clear goal of having new infrastructure in place shortly before it is needed to meet demand.

Health, safety and environment

Process safety performance was again outstanding with no Tier 1 or Tier 2 process safety events in the July/August period. The lost time injury frequency is currently 0.27per 200,000 work hours. We continue to see record engagement in our hauora korero (safety talks) which, combined with the hauora hikoi (safety walks) and E Tu Tangata (stand up people) initiatives, underpins our continued improvement in safety performance.

Costs

Overall operating have been tightly controlled with the ongoing pressurefrom higher electricity prices.

Page 2 of 6

OPERATIONAL DATA

Health, Safety & Environment

LTI

LTIF

TRC

TRCF

Tier I Process Safety Events

Tier II Process Safety Events

Releases outside of consent

Refining

Brent Crude Oil Price Exchange Rate Operational availability Unplanned process downtime Refining throughput

Gross Refining Margin

Gross Refining Margin (excluding Fee Floor/Margin Cap) Processing Fee (after Fee Floor/Margin Cap) Processing fee (after Fee Floor/Margin Cap)

Distribution

RAP throughput

Jul/Aug

Jul/Aug

YTD

FY

2019

2018

2019

2018

#

1

0

1

5

#/200,000hrs

-

-

0.27

0.48

#

1

0

1

8

#/200,000hrs

-

-

0.41

0.76

#

0

0

0

2

#

0

0

0

3

#

0

2

1

5

US$/bbl

61.52

73.49

64.89

71.2

US$/NZ$

0.66

0.67

0.67

0.69

%

99.8

97.0

99.9

90.7

%

0

0

1.3

0.8

Mbbl

7.42

7.62

28.64

40.44

US$/bbl

7.10

6.86

5.78

6.31

US$M

52.7

52.2

165.5

255

US$M

36.9

36.6

115.8

178.6

NZ$M

56.2

54.3

173.5

258.7

Mbbl

3.4

3.4

13.7

21.0

Notes:

  1. The information provided in this announcement excludes revenue from distribution or other activities.
  2. The Processing Fee results reported in this announcement are subject to change due to post announcement price updates and independent audit.
  3. A five year history of Throughput, Margins and Processing Fees is attached below.
  4. Refer to the explanatory notes/glossary for a definition of terms.

Page 3 of 6

HISTORICAL INFORMATION - REFINING

Jan/Feb

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2)

Mar/Apr

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2)

May/Jun

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2); 5)

Jul/Aug

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2)

Sept/Oct

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2)

Nov/Dec

Barrels 000's

RNZ USD GRM per barrel

1)

Singapore Dubai Complex GRM

Uplift vs . Singapore Dubai Complex

3)

NZD Processing Fee (million)

2)

Total

Barrels 000's

USD GRM per barrel

1)

NZD Processing Fee (million)

2)

YTD Cap adjustment

NZD Processing Fee (million)

1)

2015

2016

2017

2018

2019

7,056

6,826

7,160

7,011

6,963

9.91

7.96

6.58

7.54

4.88

5.40

4.95

3.42

3.37

-0.32

4.51

3.01

3.16

4.17

5.20

59.6

57.0

45.9

50.8

34.9

7,411

7,471

5,140

6,958

7,312

8.77

1.84

9.35

6.82

6.63

4.82

3.18

3.02

3.75

0.75

3.95

-1.34

6.33

3.07

5.88

62.3

14.8

48.1

45.8

50.1

6,416

6,837

7,755

3,910

6,945

8.55

6.26

7.63

0.18

4.36

4.24

2.13

2.90

2.02

0.17

4.31

4.13

4.73

-1.84

4.19

48.9

43.3

58.4

0.7

32.2

7,519

6,833

7,511

7,615

7,419

7.66

6.20

8.87

6.86

7.10

2.52

1.86

4.70

2.57

3.23

5.14

4.34

4.17

4.29

3.87

63.5

41.3

63.6

54.3

56.2

7,221

7,251

6,816

7,639

9.47

7.49

9.31

7.09

5.12

3.18

4.73

2.47

4.35

4.31

4.58

4.62

71.8

52.5

62.2

57.8

7,017

7,447

7,342

7,307

10.82

9.20

6.83

6.53

6.37

4.19

3.67

1.80

4.45

5.01

3.16

4.73

73.0

67.6

50.7

49.2

42,639

42,665

41,724

40,440

28,640

9.20

6.47

8.02

6.31

5.78

379.2

276.6

328.9

258.7

173.5

14.4

  1. Excludes Fee Floor/Cap adjustment
  2. Includes Fee Floor/Cap adjustment
  3. RNZ uplift vs . Singapore Dubai Complex GRM is in USD per barrel

Page 4 of 6

EXPLANATORY NOTES/GLOSSARY

LTI (Lost time injuries) and LTIF (Lost time injury frequency)

Lost time injuries refer to fatalities, permanent disabilities or time lost from work.

Lost time injury frequency refers to the number of lost time injuries over a rolling 12-month period, per 200,000 hours worked.

TRC (Total recordable cases) and TRCF (Total recordable case frequency)

Total recordable cases refer to lost time injuries, medical treatment and restricted work cases.

Total recordable case frequency refers to the number of recordable injuries over a rolling 12-month period, per 200,000 hours worked.

Tier 1 Process Safety Event (API 754)

  1. tier 1 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including non-toxic and non-flammable, from a process which results in one or more of the following: A LTI and/or fatality; a fire or explosion resulting in greater than or equal to $25,000 of direct cost to the company; a release of material greater than the threshold quantities given in Table 1of API 754 in any one-hour period; an officially declared community evacuation or community shelter-in-place.

Tier 2 Process Safety Event (API 754)

  1. tier 2 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including non-toxic and non-flammable, from a process which results in one or more of the following: A recordable injury; a fire or explosion resulting in greater than or equal to $2,500 of direct cost to the company; a release of material greater than the threshold quantities given in Table 2of API 754 in any one-hour period.

Operational availability

Operational availability is the percent of time available for manufacturing after subtracting maintenance and regulatory/process downtimes.

Unplanned process downtime

  1. unit downtime is "planned" if the refinery is aware of and has scheduled that unit outage in the previous year. Unplanned process downtime is the weighted average of unplanned downtime across all process units.

Refining throughput

Refining throughput is the volume of feedstock intake, comprising crude oil, residues, natural gas and blendstock, measured in barrels. One barrel equates to approximately 159 litres.

Page 5 of 6

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

The New Zealand Refining Company Limited published this content on 18 September 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 September 2019 03:51:05 UTC

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Financials (NZD)
Sales 2019 388 M
EBIT 2019 65,6 M
Net income 2019 37,9 M
Debt 2019 225 M
Yield 2019 5,16%
P/E ratio 2019 16,9x
P/E ratio 2020 9,16x
EV / Sales2019 2,23x
EV / Sales2020 2,04x
Capitalization 640 M
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Consensus
Sell
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Mean consensus OUTPERFORM
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Average target price 2,31  NZD
Last Close Price 2,05  NZD
Spread / Highest target 27,3%
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Michael Fuge Chief Executive Officer
Simon Christopher Allen Chairman
Denise M. Jensen Chief Financial Officer & Secretary
Robin Baxter Engineering Manager
Vanessa Cynthia May Stoddart Independent Director